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The Keystone XL Energy Project Is Much More Than a Pipe Dream

A recent study from researchers at Cornell University presented
some curious findings on the economic impact of Keystone XL, a
proposed multibillion dollar extension linking Canada’s rich supply
of crude oil to major U.S. refining hubs.

All told, this megaproject will stretch 1,661 miles from Alberta
to Texas’s Gulf Coast region. Immediately upon completion, the
pipeline will have the capacity to carry 700,000 barrels per day
(bpd) and ultimately the ability to transport 900,000 bpd.

So what did the new study conclude? That a $7 billion investment
won’t create jobs and may even cost jobs on net, and that the
ability to move an additional 900,000 bpd to refineries won’t have
the effect of lowering gas prices.

These claims simply defy economic logic — as well as every
previous estimate of the economic impact of Keystone XL. Simply
put, the study’s conclusions are specious, even absurd.

The Cornell study, which environmentalists have trumpeted, is
born of desperation. Facing a likely go-ahead decision from the
U.S. Government, the study is a last ditch attempt to drum up
opposition to a no-brainer, market-approved project.

In fact, the Keystone XL pipeline will give our country a more
stable and cheaper source of fuel and create thousands of quality
American jobs. And taxpayers (think Solyndra) will not risk a
dime.

Think of the public-policy benefits of the project, the sound
private economics aside.

The United States currently consumes 25% of the world’s energy,
but produces less than 5 percent. Heavily dependent on foreign oil,
America imports 11 million barrels each day.

This need for foreign oil isn’t going to change anytime soon.
The 2010 Annual Energy Outlook projects that over 40 percent of
U.S. liquid fuel consumption will be supplied by imports through
2035. Global demand for oil will only rise too — 39% between
2005 and 2030.

Also note that oil imports to the United States from South
America aren’t holding steady. Mexico and Venezuela, two
historically large exporters of crude oil, have radically reduced
production in the past few years, making imports from Canada that
much more essential.

A new influx of up to 700,000 bpd from Canada will dramatically
increase U.S supplies and in turn drive gas prices down. A study
from Energy Policy Research Foundation found a greater supply of
Canadian oil could save Gulf Coast refiners almost $500 million
annually in transport costs, which, in turn, would mean lower
prices for consumers at the pump.

Keystone XL’s impact on cost is simple: a supply of plentiful
and easily accessible oil drives down prices for gasoline and other
consumer staples.

Construction of Keystone XL will also deliver added jobs and tax
revenue at a time when the country needs both. The project requires
land to be prepared, miles of pipe to be welded and installed, and
30 new pumping facilities to be built and operated. Thousands of
new construction jobs will be immediately necessary.

According to the Canadian Energy Research Institute, by 2019
employment directly related to Keystone XL could grow from 80,000
jobs to 179,000. If the flow of Canadian oil through the United
States remains unchanged, however, total employment from the
Keystone line will peak at 94,000 in 2019.

The respected Perryman Group found that across the entire
economy, an increase in stable oil supplies would create 250,348
permanent jobs from gains in U.S. economic activity. Personal
income gains from these jobs would amount to $6.5 billion,
stimulating $2.3 billion of retail sales.

These compelling arguments about the benefits of Keystone XL
have been giving environmentalists indigestion. Little surprise
that the Cornell study is authored by a board member of Greenpeace
Canada and financed by Goodman Group, a consulting firm that puts
the interest of its environmentalist clients first.

The projections for employment are so low one wonders if the
study examined the right pipeline project. But the study changes
the game by calculating how many “green” jobs are foregone by the
pipeline project to reach its conclusion.

But what does America need more of? Jobs financed by the private
sector? Or bubble jobs created by government subsidies? Jobs that
generate tax revenue? Or jobs that cost $1.3 million in government
loans each, as in the Mojave Solar Project, recent recipient of
$1.2 billion in taxpayer largesse compliments of the Department of
Energy.